Truth and Reconciliation

'Reconciliation" means "restoration of harmony." But as a term of art in budgeting, it has become an act of war. President Obama and most Democrats in Congress hope to include health and education reform in reconciliation instructions as part of the budget process. No mystery why. The sixty vote hurdle in the Senate of the filibuster could scotch these central components of their agenda via united Republican opposition. Bills considered under reconciliation cannot be filibustered and can therefore pass the Senate by majority vote. Republicans are outraged by what they argue is an egregious partisan power grab, one that tramples on Senate rules and norms permitting extended debate and amendment.

What is the precedent for using reconciliation to enact major policy changes? Much more extensive than the architects of the Congressional Budget and Impoundment Control Act of 1974 had in mind—or than Senate Republicans are willing to admit these days. Reconciliation was designed as a narrow procedure to bring revenue and direct spending under existing laws into conformity with the levels set in the annual budget resolution. It was used initially to cut the budget deficit by increasing revenues or decreasing spending but in more recent years its primary purpose has been to reduce taxes. Twenty-two reconciliation bills were passed between 1980 and 2008, although three (written by Republican majorities in Congress) were vetoed by President Clinton and never became law.

Whether reducing or increasing deficits, many of the reconciliation bills made major changes in policy. Health insurance portability (COBRA), nursing home standards, expanded Medicaid eligibility, increases in the earned income tax credit, welfare reform, the state Children’s Health Insurance Program, major tax cuts and student aid reform were all enacted under reconciliation procedures. Health reform 2009 style would be the most ambitious use of reconciliation but it fits a pattern used over three decades by both parties to avoid the strictures of Senate filibusters.

To be sure, there is a price beyond the political one for using reconciliation. Elements in bills that are not strictly designed to have a budget impact can be removed on points of order, leaving comprehensive bills less than comprehensive. And the time frame for reconciliation bills is at most ten years, after which they expire unless explicitly renewed (the problem, of course, with the Bush tax cuts.)

The best path would be to have reconciliation as an implicit or explicit threat: if Democrats can employ it to accomplish the policy goal with only a simple majority, Republicans may be persuaded to abandon efforts to use their 41 votes to just say no and instead engage the majority constructively to find common ground. But if that is not feasible, it is perfectly reasonable for Democrats to use the process for health care reform that both parties have used regularly for other major initiatives. The result might be more piecemeal and imperfect, but it would be better than the alternative of no bill at all.

Budget Reconciliation Bills Signed Into Law, 1980-2008

Bill

Major Purposes

Change in Revenue

Change in Outlays

Net Effect on Deficit

Omnibus Reconciliation Act of 1980

First use of reconciliation process.

$29.2 billion

-$50.38 billion

-$79.58 billion; 1981-1985

Omnibus Budget Reconciliation Act of 1981

Made significant cuts to discretionary programs, including welfare and food stamps.

-$130 billion

-$130 billion; 1981-1984

Omnibus Budget Reconciliation Act of 1982

Reauthorized and made changes to food stamp program. Made changes to federal employee pay formula and to the farm support program.

-$13.3 billion

-$13.3 billion; 1983-1985

Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)

Rescinded some provisions of the previous year’s Kemp-Roth tax cuts.

$98.3 billion

-$17.5 billion

-$115.8 billion; 1983-1985

Omnibus Reconciliation Act of 1983

Made changes to federal employee pay and retirement formulas.

-$8.2 billion

-$8.2 billion; 1984-1987

Consolidated Omnibus Budget Reconciliation Act of 1985

Mandated an insurance program giving some employees the ability to continue health insurance coverage after leaving employment (COBRA) and amended the Internal Revenue Code to deny income tax deductions to employers for contributions to a group health plan unless such plan meets certain continuing coverage requirements.

$9 billion

-$15.9 billion

-$24.9 billion; 1986-1989

Omnibus Budget Reconciliation Act of 1986

Ordered the sale of Conrail. Made minor changes to Medicare hospital provisions.

$10.5 billion

-$6.5 billion

-$17.0 billion; 1987-1989

Omnibus Budget Reconciliation Act of 1987

Created federal standards for nursing homes under Medicare and expanded Medicaid eligibility

$23.2 billion

-$16.4 billion

-$39.6 billion; 1988-1989

Omnibus Budget Reconciliation Act of 1989

Made approximately $10 billion in spending cuts

$15.4 billion

-$23.77 billion

-$39.2 billion; 1990-1992

Omnibus Budget Reconciliation Act of 1990

Established Pay-As-You-Go (PAYGO) rules for the first time and implemented a range of tax increases

$137 billion

-$184 billion

-$236 billion; 1991-1995

Omnibus Budget Reconciliation Act of 1993

Created two new personal income tax rates and a new tax rate for corporations. The cap on Medicare taxes was repealed, and gas taxes were raised. The taxable portion of Social Security benefits was increased. The phase-out of the personal exemption and limit on itemized deductions were permanently extended, and the earned income tax credit was expanded.

$250.1 billion

-$254.7 billion

-$504.8 billion; 1994-1998

Personal Responsibility and Work Opportunity Act (1996)

Clinton’s welfare reform bill

$1.9 billion

-$52.2 billion

-$54.1 billion; 1997-2002

Balanced Budget Act of 1997

Contained first portion of Clinton’s plan to balance the federal budget by FY 2002. Created the Children’s Health Insurance Program. Made changes to Medicare hospital payment policy.

Tom Mann is a Senior Fellow in Governance Studies at the Brookings Insitution, where Molly Reynolds is Senior Research Coordinator. Norman Ornstein is a Resident Scholar at the American Enterprise Institute.